Morgan Stanley Will Buy a $500B-AUM Fund Firm
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Thursday, October 08, 2020

Morgan Stanley Will Buy a $500B-AUM Fund Firm

Days after rumors floated about a big activist investor pushing one asset management mega-merger, an entirely different asset management mega-merger is officially in the works.

Daniel "Dan" Simkowitz
Morgan Stanley
Head of Investment Management
This morning James Gorman, chairman and CEO of Morgan Stanley, confirmed that the New York City-based, publicly traded investment bank has agreed to acquire Boston-based, publicly traded Eaton Vance Corp. in a deal valued at about $7 billion. The price is split roughly 50-50 between cash and Morgan Stanley stock, and the deal is expected to close in the second quarter of next year. Watch for increased economies of scale.

Eaton Vance, a firm with a 96-year history, has more than $500 billion in AUM, so the $7-billion valuation translates into 1.4 percent of its AUM. That valuation is also a 49.2 percent premium over Eaton Vance's market capitalization of $4.693 billion as of market close yesterday.

Morgan Stanley is no stranger to asset management. The deal is expected to boost Morgan Stanley Investment Management's (MSIM's) AUM by more than 70 percent to about $1.2 trillion. Gorman describes Eaton Vance as "a perfect fit for Morgan Stanley."

"This transaction further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise," Gorman states.

Tom Faust, CEO of Eaton Vance, describes the deal as a way to accelerate Eaton Vance's growth by building on "common values and strengths, which are focused on ... commitment to investment excellence, innovation and client service."

Dan Simkowitz, head of MSIM, lauds Eaton Vance for its "strong brand recognition and high quality complementary platforms in key secular growth areas." (The Morgan Stanley folks point in particular to Eaton Vance's strength in retail SMAs, customized solutions from its Parametric arm, ESG from its Calvert arm, "value-added fixed income solutions," and U.S. retail distribution."

"These two businesses have limited overlap and are combining from positions of strength to create one of the leading asset managers in the world," Simkowitz states.

Yet the Morgan Stanley team still expects costs savings of $150 million, about four percent of the combined expenses for MSIM and Eaton Vance. They also predict boosts to distribution and scale, as well as new revenue opportunities.

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